Encana Shifting Domicile to US, Reports 3Q Profit
Encana, once Canada’s largest natural gas producer, said October 31 it will establish its corporate domicile in the US and rename itself Ovintiv in an effort to tap into larger pools of investment funds.
Separately, the company announced 3Q 2019 net earnings of US$149mn (C$196mn), up from US$39mn in the third quarter a year ago.
The move to the US is a strategic one, CEO Doug Suttles said, and follows Encana’s efforts over the last five years to transform its portfolio from a gas focus to a liquids focus.
“Over the last five-plus years, we have transformed our portfolio and our culture,” he said. “We’ve created a high quality, liquids focused multi-basin portfolio.”
Encana’s move to a US domicile, however, is seen as “troubling” but “not surprising” by Alberta energy minister Sonya Savage.
“I am troubled by the news that Encana is formally relocating its headquarters to the US,” she said in a statement. “Sadly, I cannot say I am surprised, as Encana has been shifting its efforts to the US for years, in large part due to harmful policies in Canada.”
That the timing of the domicile move came so soon after a federal election that saw political parties opposed to further oil and gas development in Canada – led by Liberal prime minister Justin Trudeau at the head of a minority government – take the reins of power, Savage said, “is no coincidence.”
In November 2018, Encana effectively adopted a “headquarter-less” business model, with operational centres in Denver – where Suttles is located – Houston and Calgary. That move, she said, effectively signaled Encana’s desire to transition away from Canada to greener pastures in the US.
“I would encourage all to read Encana founding CEO and energy pioneer Gwyn Morgan’s 2018 commentary on how the company he founded is being pushed out of Canada due to policies from our federal government,” Savage said. “I sincerely hope today's news will serve as a wake-up call for leadership in Ottawa.”
Encana’s core operational areas are in three basins – the Permian and the Anadarko in the US and the Montney in Canada – and its focus on innovation and efficiency is consistently delivering strong financial and operational performance, Suttles said.
“A domicile in the US will expose our company to increasingly larger pools of investment in US index funds and passively managed accounts, as well as better align us with our US peers,” he said. “The change in corporate domicile will not change how we run our day-to-day activities, [but] our actions show that we will leave no stone unturned to capture the value we deeply believe exists within our equity.”
Along with the change in corporate domicile, a consolidation and share exchange will be completed that will give shareholders one common share of Ovintiv for every five common shares of Encana. Shares will trade on both the New York and Toronto stock exchanges under the ticker symbol OVV.
A special meeting of shareholders will be held early next year to approve the name change, the share consolidation and the US domicile. Approval of two-thirds of the votes cast will be required to effect the changes, as will approvals from stock exchange and Canadian courts.
In the third quarter, Encana reported total production of 605,100 barrels of oil equivalent (boe)/day, up from 378,200 boe/day in the same period last year, largely reflecting its acquisition earlier this year of Newfield Upstream, which is dominant in the Anadarko basin. Natural gas production averaged 1.65bn ft3/day, up from 1.2bn ft3/day, while oil and liquids production increased to 329,200 b/d from 178,700 b/d.